Do You Need Probate if You Have Ownership in the Deceased's Bank Account?

One common way that people try to avoid the probate process is by holding assets jointly with other people, such as a spouse or adult child. If the documents creating the joint ownership are executed properly, the asset will pass directly to the surviving joint owner when one of the owners dies.

This is good news for most people, but unfortunately it usually doesn't eliminate the need for probate. What joint ownership of a bank account may do is help reduce the size of the probate estate so that it qualifies for the small estate process.

Often, however, individuals with bank accounts large enough to potentially affect whether their estate is considered "small" have enough other assets for their estates to require probate. A better way to avoid probate altogether is with the use of a living trust and/or other estate planning tools.

How to Keep Joint Bank Accounts Out of Probate

Regardless of whether having a joint bank account lets you avoid probate altogether, you do want to make sure that your joint bank account does what you intend it to do: namely, pass directly to the other owner on the first joint owner's death.

You should not assume that ownership will automatically pass to the other named account holder just because both names are on the account. Even if the bank believes you intended to create a right of survivorship, unless that is explicitly spelled out in the account documents, it may not happen. Instead, the right of the other account owner might be challenged by one of your other heirs, and a court could find that the account is part of the probate estate. Make sure your account documents include the words "right of survivorship."

In Ohio, opening a joint account without providing for survivorship is considered conclusive evidence, absent fraud or mistake, that the depositor did not intend to create a right of survivorship in the account.

Other Options for Transferring Bank Accounts Outside Probate

Making sure your account properly designates a right of survivorship isn't your only concern. When you create a joint bank account, both owners have full access to all funds in the account. If your intention is simply to have someone else's name on the account so that they will take the money when you die, there may be a better way to protect your interests.

Right now you may be thinking to yourself that your joint account holder would never drain funds from the account. That may well be true. But the funds may nonetheless be vulnerable. If the joint owner gets divorced, the account may be considered a marital asset by the divorce court, and subject to division. Or if a creditor obtains a judgment against the joint owner, the creditor may be able to reach joint account funds to satisfy the judgment.

An alternative to joint accounts with these problems is the use of a "transfer on death" (TOD) account. With a TOD account, you create a beneficiary designation for the account, and it passes directly to the intended beneficiary, outside probate, upon your death. The beneficiary has no interest in the account during your life, so it is not vulnerable to a divorcing spouse or a reaching creditor.

The best option is to create a living trust with yourself as the initial trustee. With a trust, even if your primary beneficiary dies before you or is a minor, the account will avoid probate in all circumstances.